An American Editor

February 1, 2010

We’re Running as Scared as We Can

The cry heard in the hallways and boardrooms of the giant publishers is, “We’re running as scared as we can!” Events of the past few weeks simply confirm that those being paid the big bucks have no clue what to do. They are flailing in every direction possible, hoping that somewhere there is a life preserver to grab.

The most recent grab was for the Apple iPad. How clueless can one be to think that Apple would prevent the Titanic of Publishing from sinking. Apple brings to the table a very crippled — from a reader’s perspective — device for ebook reading — and it doesn’t do anything at all for multitaskers. But the big boys heard something they wanted to hear: ebook pricing of $12.99 to $14.99, not $9.99.

But not everything is rosy. If Apple charges $14.99 for ebook XYZ and Amazon charges $9.99, where are consumers most likely to buy the ebook? [News Update: Over the weekend, and after this post was written and scheduled for publication, Amazon conceded to an agency model with Macmillan similar to the model Macmillan has with Apple. Consequently, Macmillan ebooks will be similarly priced on Amazon and Apple. Now we only need to wait a few moments for the other publishers to follow suit.]  Ahh, but Apple’s device will only read books bought at the Apple bookstore, so a book bought at Amazon won’t be readable on the iPad. For that to work, Apple will have to shut out all other booksellers. Alternatively, Apple could make its DRM available to other booksellers. If it does, do publishers truly believe Amazon and Barnes & Noble will sit idly by?

And there is a mighty big assumption being made: that iPad buyers are readers. No one has yet demonstrated that people are chomping at the bit to read on the iPad or that they buy more than 2 books a year.

Suppose Apple sells enough ebooks to capture 20% of the ebook market and begins to exert pressure on publishers to lower their pricing or to do away with DRM. What will publishers do? Aren’t publishers simply requesting a repeat colonoscopy just from a different vendor? Do they really think Steve Jobs is any more interested in their survival than is Jeff Bezos?

Publishers are deceiving themselves. There is no white knight, no altruistic company out there just itching to be a good Samaritan and save the publishing model publishers have come to love. It’s time to wake up and recognize that smell for what it is.

To be saved, publishers must do it themselves. It can be done.

Be creative. Create a multipublisher reader’s ebook discount program for consumers. Establish a central repository (see A Modest Proposal: Dying Days of Giant Publishers) that is device and bookseller agnostic. Improve book quality.

Think about cutting back on 7-figure author advances. Think about ebook device subsidy plans along the lines of what cell phone companies do. Especially think about such plans for K-12 students. Most important of all: fully embrace ebooks.

Forget about trying to control price; don’t fret about it. Here’s the bottom line: Let Amazon sell books at a loss. Who cares. If Amazon decides to compete in the publishing marketplace, let it. [News Update Questions: Will Macmillan’s gambit this past weekend, especially if other publishers follow suit, speed Amazon’s entry into the publishing side? If it does, will Macmillan and cohorts be able to financially compete for authors with the Amazon juggernaut? Have publishers written their funeral oration with this move? Bottom line: Has Macmillan really thought through the possibilities?] If publishers are right that they will lose money at a $9.99 price point, wouldn’t Amazon , too? Or is this a fiction? Besides, let’s be realistic about Amazon — like Apple it wants to make money. If Amazon enters the publishing market and discovers that it can make more money by charging prices higher than $9.99, it will. Consumers only kid themselves if they think Amazon is their friend.

Take up the challenge. Tell Amazon that if it really thinks the maximum price point should be $9.99, prove it to publishers by setting a ceiling of $9.99 on all ebooks. If that is truly the sweet spot, sales will soar and publishers will be able to react and will react accordingly. After all, if Amazon starts selling 60,000 copies of an ebook at $9.99 that publishers have only been able to sell 5,000 copies of in any format at a higher price, publishers will take notice and begin to think that maybe $9.99 is the sweet spot.

Tell Amazon to put up or shut up. If Amazon demonstrates that $9.99 is the pricing sweet spot, publishers will rapidly adjust their business model to accomodate it. Publishers and Amazon have this in common: both want to sell more books and make more money. Whatever is in the way has to be moved aside.

eBbooks are here to stay. eBooks are the growth area for publishing; pbooks are in permanent decline. Publishers must come to grips with that change.

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